Kepler trust ratings 2024: Smid-cap trusts offer new opportunities

Mercantile, Schroder UK Mid Cap and Montanaro UK Smaller Companies among the trusts highlighted for consistent performance

Top rated funds


Smid-cap focused trusts were highly rated in Kepler Trust Intelligence’s (KTI) annual update, which highlights investment trusts that have performed well over a five-year period.

Investment trusts such as the £167m Montanaro UK Smaller Companies, £196m Schroder UK Mid Cap and the £1.6bn Mercantile all made their way onto the ‘Income & Growth’ ratings category, which highlights trusts with strong long-term income and growth prospects.

KTI’s rating system highlights trusts which it believes have demonstrated attractive and consistent performance characteristics over the long-term, using the advantages of the investment trust structure to benefit shareholders.

Trusts are rated based purely on performance in three categories: long-term growth, income and growth, and high current income.

Overall, 20 investment companies were awarded the Income & Growth rating, including Templeton Emerging Markets, JP Morgan Global Growth & Income, and Fidelity Special Values.

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Kepler Income & Growth ratings

JPMorgan China Growth & Income
JPMorgan Global Growth & Income
Lindsell Train
Montanaro UK Smaller Companies
Utilico Emerging Markets
JPMorgan Asia Growth & Income
JPMorgan European Growth & Income
CC Japan Income & Growth
Schroder UK Mid Cap
Templeton Emerging Mkts
Henderson Opportunities
Fidelity China Special
BlackRock World Mining Trust
TR Property
Invesco Asia
Schroder Income Growth
Weiss Korea Opportunity
Schroder Oriental Income
Fidelity Special Values
Source: Kepler Trust Intelligence

Thomas McMahon, investment trust research manager at KTI, said: “Rock-bottom valuations, particularly in the UK, have created a really interesting opportunity. While a fund like Schroder UK Mid Cap is obviously interesting as a long-term growth play – the FTSE 250 has historically been one of the best-performing growth markets – at the time of writing you can buy the shares on a 3% yield.”

He added the strategy could prove appealing to an investor who wants to draw a growing income stream over many years, while hopefully growing their capital too, as well as to those who like the more defensive attributes of equity income as a total return strategy.

“The past year saw challenging macro conditions filter down into the investment trust space, but many funds in the sector have proved resilient. Our 2024 ratings highlight a suite of trusts with different styles and strategies, all of which have a proven track record of strong risk-adjusted performance versus underlying markets and a stable management team.

“For investors seeking active exposure, the investment trust space is full of talented managers with interesting and idiosyncratic strategies – our ratings showcase some of the best with the potential to outperform in multiple environments.”

Growth rated funds

In this year’s ratings, a number of income-focused funds were highlighted for strong performance in a range of environments over the five-year period, including Dunedin Income Growth and Murray Income Trust.

“The five years to the end of December 2023 saw a strong rally in growth in 2019, in tech, ecommerce and China in 2020 and then a surge in value over growth in 2021 and 2022, initially in a rising market and then in a terrible 2022. Last year, meanwhile, saw choppy style performance, with many markets ending, and looking cheap by historical standards, with the most glaring exception being US large-cap tech”, said McMahon.

Ashoka India Equity topped the ratings table in the first year it was eligible to be considered. McMahon said the trust had scored very highly on growth ratings such as the information ratio and upside/downside capture.

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Kepler Growth Ratings

Pershing Square Holdings
Ashoka India Equity Investment
BlackRock Greater Europe
Canadian General Investments
Fidelity European Trust
Pacific Assets
JPMorgan Emerging Markets
Henderson EuroTrust
Henderson European Focus Trust
Invesco Select Glo Eq Inc
Pacific Horizon
Dunedin Income Growth
CQS Natural Resources G&I
Schroder Asian Total Return
Murray Income Trust
BlackRock Frontiers
BlackRock Energy and Resources
JPMorgan Global Emerg Mkts Inc
RIT Capital Partners
Merchants Trust
Source: Kepler Trust Intelligence

Alternative Income ratings

A total of 14 trusts received a Kepler rating in the ‘Alternative Income’ category as the alternatives space continues to evolve.

The £496m Gresham House Energy Storage and Gore Street Energy Storage funds became the first ever energy storage trusts to feature in the Kepler annual ratings.

The Gresham House trust currently yields 7.3%.

Meanwhile, Greencoat UK Wind, CVC Income & Growth and 3i Infrastructure all also made the list. 

Kepler’s McMahon added: “For this rating, we look across the sectors to reward those that have managed to maintain or grow both their dividend and their NAV over five years. In our view, this rating rewards those that have ‘proof of concept’ and could be a starting point for investigation.”